Inflation is becoming broad-basedCannot say that monetary policy cannot curb inflation pressuresThat’s Holzmann, Nagel, Kazaks, Knot, Villeroy and now Vasle to have been the more vocal parties in calling for quicker rate hikes. But perhaps the bigger shift has been the one by Rehn here. He is perceived as a bit of a dove so to be siding with the hawks, that perhaps signals a shift in thinking within the governing council.The mood music has certainly benefited the euro so far today, with EUR/USD up 0.4% to 1.0580 currently.

Does not see recession but a much weaker growth rateOptimistic about a monetary policy move this yearDoes not buy the argument that monetary policy should hold back just because of the economyThe remarks here are to be expected by Nagel, considering he is among the hawks. But they certainly have been a vocal bunch lately and it is helping to tip the scales in terms of market expectations at least. Money market odds are pointing to three 0.25% rate hikes from the ECB by October.

First, the BOE showed hesitancy. Then, they certainly look to be bottling the tightening cycle as they paint a rather bleak picture of the UK economy. But this playbook may not be something on its own at the end of the day.As inflation continues to run rampant or is at least looking to be more persistent, it could very well be the case for the US economy when we get to Q3 or Q4 this year. The question then becomes, what will the Fed do next?With surging inflation pressures and a slowing economy, the BOE is struggling to strike a balance on combating the former without making the latter situation worse with tighter policy.Even BOE chief economist, Huw Pill, earlier confessed to that sentiment:“It is a tricky balance to control inflation without slowing growth more than necessary. And the arguments around where rates should be set in order to achieve that balance are quite finely balanced in themselves.“If that doesn’t sound like a policymaker who is losing belief in the tightening cycle, then I don’t know what is.As such, the major worry for the Fed is that it might be going down the same path as the BOE but just a few steps behind. In judging that, economic data is going to be key. Any higher inflation readings and weaker economic activity will start to ignite stagflation risks and that could very well bring about fears at the Fed that it would turn into the next BOE.Only time will tell how all of this plays out but it certainly is a case scenario that shouldn’t be ruled out.

The push and pull continues as EUR/USD has rebounded by nearly 100 pips now from a low of 1.0483 to a session high of 1.0580. This comes as the dollar is seen giving up gains across the board after a fresh rally earlier in the day. Of note, EUR/USD is now trading back above both its key hourly moving averages again: Meanwhile, GBP/USD is also up from a low of 1.2275 to 1.2350 currently, down just 0.1% on the day. Elsewhere, AUD/USD has also moved up from 0.7065 to 0.7105 and is also down just 0.1% while NZD/USD is flat at 0.6425 from a low of 0.6396 earlier. The move lower in the dollar comes as US futures also see a bounce with S&P 500 futures moving off a low of 4,112.75 (down 0.7%) to 4,139.25 (down 0.1%) currently. It’s the flow show at the moment and I would expect that to be the case until we get to the weekend break.